Fiscal Health of Urban Districts Tied to Costs of Teaching Poor

The ability of urban school districts to identify and address the
higher costs incurred in educating poor children may be the major
determinant of their fiscal health in the coming years, according to a
draft report of a new study by the U.S. Education Department's School
Finance Project.

The districts most likely to meet that challenge, according to the
report, are characterized by higher-than-average per-pupil
expenditures, heavy reliance on local revenue sources, and low
proportions of children under 5 years of age.

And, not surprisingly, the prospects for large-city districts
correlate closely with the outlook for the states in which they are
situated, although the research team did find exceptions. Some
districts with otherwise poor prospects were upgraded, the report says,
because they can reasonably expect to benefit from their states' better
outlook.

The report, "The Financing of Urban Public Schools: A Report on
Selected School Systems," which is expected to be issued in final form
within a month, is a supplement to the project's assessment of state
prospects for funding education. Both are part of a comprehensive,
four-volume study of school finance ordered by the Congress in
1978.

The urban-schools study is based on 1980 data from 44 districts,
including five county districts that take in large cities. The sample
represented about 13 percent of the nation's public-school children in
1979-80 and over half the systems enrolling more than 50,000 pupils,
according to the report.

A district characterized as having "good prospects" cannot
necessarily expect to see its absolute level of resources increase;
instead, it is one that is considered likely to maintain or improve its
average per-pupil expenditure over time. Hence, an expected increase in
enrollment is considered a burden, since it is unlikely that resources
will be increased accordingly; stable or declining enrollment is seen
as an advantage.

"You couldn't say the cities were so broke that they needed help for
school purposes, because [the situation] varied so much," said Esther
O. Tron, principal author of the report. "It was the composition of the
pupil population that might require more resources. I think that's the
way to handle the problem. ... We should concentrate on the kinds of
kids who go to those schools."

By 1980, the pupil composition of the sample districts had already
changed considerably, and the trend is expected to continue.

"Over the decade, the population of large cities has become less
wealthy, with an increased concentration of minorities and a growing
incidence of elderly," the report says. "Urban school systems reflect
some similar demographic features: they are increasingly composed of
children who are poor and from minority backgrounds. ... What is clear
is that central cities have a high incidence of educationally needy
children and that their numbers are likely to grow."

In the majority of the sample cities, public-school enrollment
declined by more than 20 percent--or nearly twice the national
average--between 1969 and 1979. But the rapid decline produced a
financial cushion for many cities, particularly those that were not
heavily reliant on enrollment-driven state aid, leading to increased
per-pupil expenditures. By 1978-79, all but four of the sample cities
had per-pupil expenditures at least equal to their states'
averages.

At the same time, however, the cities became poorer, as measured by
per-capita income, with urban income declining relative to states'
average income.

The study included two other dimensions in its analysis of funding
prospects: the proportion of children living in poverty (the national
average is 4.5 percent) and the proportion of children under age 5 (the
national average is 7.2 percent). Where the proportions exceeded the
national averages, districts were presumed to be "burdened."

"To what extent cities will be able or willing to raise additional
revenues for schools may be the critical issue," the report says. "The
current urban population composition does not suggest a strong
constituency for increasing school taxes. In addition, cities are
constrained in levying taxes on businesses because of concerns about
business flight. While at the present time most central-city school
districts in the sample appear to have favorable levels of expenditures
per pupil, it is likely that more than average resources are needed to
educate their student populations."

The final factor in the analysis was "weighting" expenditures to
reflect each district's proportion of poverty-level students. Drawing
on the practices of several states that provide extra aid for such
children, the researchers concluded that it costs about 25 percent more
than the average to educate a child from a poverty-level family.

Ms. Tron cautioned that the study does not take into account
developments since 1980, such as Proposition 2 in Massachusetts and
cuts in federal aid, that might have affected the fiscal position of
the districts.

Based on expenditures, state prospects, and demographic factors as
of 1980, the researchers categorized the sample districts according to
prospects for funding and identified characteristics common to each of
the categories.

The types of districts and salient characteristics are:

Districts with good prospects. These spent more than 10 percent
above the national per-pupil average in 1980 and maintained this
advantage even when the expenditure was weighted to reflect incidence
of poverty in the district. Per-capita income in these cities is around
the state average, but revenue efforts are higher. These districts tend
to rely heavily on local revenue for schools (which is why they are
higher-than-average spenders) and are best able to absorb declines in
state and federal aid. Most have lower-than-average incidence of
children under 5, suggesting they will not be strained by sudden
enrollment increases. They tend to be located in the northern half of
the country and in states with good or average funding prospects.

Examples: Denver, Minneapolis, Pittsburgh, Seattle.

Districts with average prospects. These were spending within 10
percent of the national average or more than 10 percent above average,
but the high incidence of poverty offset that advantage. They did tend,
however, to spend well above their states' averages. They include four
of the five county districts in the sample and are located in the
Mid-west, Southeast, and West.

Districts with poor prospects. These spent more than 10 percent
below the national average or spent close to the average but "appear
seriously deficient when their excess incidence of poor children is
taken into account." They tend to have per-capita incomes below their
state averages and higher-than-average tax efforts, and they tend to be
located in states with poor fiscal prospects.

Nearly all the districts in this category had higher-than-average
incidences of children under 5, and several were in the Southeast,
where state equalization formulas tend to work to the disadvantage of
the relatively wealthier cities.

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